What Should Be In An Intellectual Property Licensing Agreement?

By - November 3, 2023 - Technology & IP

Basics of IP License Agreements

Fundamentally, an intellectual property license agreement is a contract between two companies over the use of intellectual property. A license agreement can include anything covered under patents, copyrights, and trademarks. In this scenario a licensor owns the intellectual property and the license agreement allows the licensee to utilize the property in whatever terms the agreement states. The agreement provides clear legal terms on how both parties are able to use the intellectual property. The agreement also outlines legal action that should be taken if the licensee does not respect the terms of the agreement. In the case of intellectual property infringement, the licensor may take legal action against the licensee based on their agreement.

Prior to signing license agreement it is imperative a licensor be certain they are the sole owner of the intellectual property to ensure there is no discrepancy in ownership which would impact the licensing agreement. Intellectual property licensing agreements should always be prepared or reviewed by lawyers who have experience in IP licensing to ensure the contracts include all necessary sections, definitions, terms, and all other considerations.

How an IP License Agreement can Benefit Your Company

When a company licenses their intellectual property it provides the opportunity for expansion and growth. A licensor can benefit from a contract through royalties, diversifying their product line, reaching international markets, and more. Oftentimes companies will turn to IP licensing in order to get goods and services to market faster by utilizing the research and development of existing companies. This means you may be able to license your intellectual property to increase your own revenue. Copyrights, patents, and trademarks can be licensed as intellectual property assets, potentially providing great financial benefits for your company. This includes computer software, merchandising products and services, books, games, music, and many other products and services. A licensor can set terms for each agreement in order to protect their intellectual property, brand, strategies, etc. Licensing agreements may be a great way to increase your profits, your reach, and the products you have on the market.

Intellectual Property Agreement Negotiations

Some of the most important parts of intellectual property licensing agreements require all involved parties to negotiate and allow adjustments to the agreement. When negotiating the licensing agreements it is important to create terms that work for both parties. During negotiations, the goal is to finalize the agreement so that all parties involved will benefit. While there are certainly terms to protect both parties from infringement or other disputes, the goal should be to create a license agreement that serves both sides. [82]

Do I Need an Intellectual Property Licensing Agreement

Any companies licensing their IP to another company should have a license agreement if any patents, trademarks, copyrights, or product designs are included in the deal. A license agreement can be very diverse, covering many aspects of the contract. This agreement is put in place for both parties involved to lay out terms, protect both parties from infringement, and ensure the terms are fully agreed upon after negotiations have taken place. These agreements have a plethora of benefits for both parties and when structured properly can yield great results. Licensors can potentially see an increase in market share, greater access to their products in unexplored markets, new revenue streams, and more opportunities for collaboration and growth in the future. In short, if IP is being shared, a licensing agreement should be written.

What To Include: IP Agreement Contents

An intellectual property license agreement must be very thorough and clear so that all parties have an in-depth understanding of the terms of the agreement. Contracts of this nature are all unique in how they are written to best serve the parties involved, however there are common items that should be included. These items include things like a clear definition of the ownership of the IP, the agreed upon length of the agreement, and the financial terms of the contract. Working with experienced lawyers ensures that your agreement covers contingencies and other variables that may arise at a later date. Attorneys at The Stevens Law Firm have a wide range of experience in IP, trademarks, patents, copyrights, trade secrets, and contract disputes. With this experience your agreement will act as a clear and concise contract that helps to protects you, all with the goal to help grow your business and increase profits.

Primary types of IP Licenses

Choosing the type of intellectual property license determines how the IP will be used by all parties involved. This is a key step to understanding the agreement and should be clearly agreed upon far before any contract negotiations begin. There are three primary types of intellectual property licenses which all determine who in the agreement can utilize the IP during the length the agreement is effective. There are exclusive, non-exclusive, and sole intellectual property licenses.

Exclusive: An exclusive license gives the licensee exclusive rights of the intellectual property during the entire duration. An exclusive agreement means the licensor gives up their right to use the IP until the license expires.

Non-Exclusive: With a non-exclusive license the licensor retains the right to use the intellectual property while the license is in effect, however the licensee does hold sole rights for the intellectual property. In this scenario there may be more than one licensee who has rights to the intellectual property while the agreement is in effect.

Sole: Both the licensor continues to use the intellectual property while allowing the licensee to simultaneously use it. Both parties can use the intellectual property, and no other licensees can sign an agreement until the one in effect ends.

The Financial Terms

Both parties must agree on the financial terms of their agreement to decide on how fees will be paid, if there will be royalties, etc. It is a common practice for the fee to be a set amount which is paid in full at the beginning. Recurring fees or royalties are also acceptable payment terms, however royalties are more common with copyrighted and trademarked intellectual property.

Markets & Territories

It is important to set the scope of the markets and verify which territories the licensee is going to be doing business. A licensor may not want competition in the same market, but can increase profits by allowing a licensee to sell products internationally. Territories are often described as worldwide, however if the licensor wants to restrict the markets the licensee can operate in that is well within their rights, so long as these terms are clear in the licensing agreement.

Length of the Terms

The length of the agreement must be decided. Both parties likely have strategic intentions behind the length of the terms. Certain types of indefinite licensing agreements may involve enforceability concerns and should, at minimum. have terms in them to allow each party the option to terminate the agreement. By providing a reasonable notice, agreed upon by both parties, the contract can be terminated without legal action. Like all aspects of an intellectual property license agreement, these terms will be entirely unique to the individual agreement and should be reviewed by an experienced intellectual property lawyer. [100]

Intellectual Property Rights

The agreement should include the rights of both parties in regards to use of the intellectual property. It should be clear whether the licensee has the right to reproduce, adapt, or distribute the intellectual property. This is to guarantee the licensee does not utilize the intellectual property in a way that falls outside of the terms.

Governing Law

Within this section, you determine which laws and governing body oversee the IP license. Like many parts of an intellectual property agreement this will vary widely depending on the circumstances of the parties involved. Consideration should be given to both federal and state law and jurisdictions.

Infringement Terms

To guarantee there isnt illegal infringement on the intellectual properties owners rights, there should be very clear terms of what is allowed under the agreement. There should also be a clearly defined course of legal action if either parties breach their contract or infringe upon their rights as set by the license agreement. This should ultimately benefit both the licensor and licensee.

Dispute Resolution

Even within a well negotiated licensing agreement, there is always the possibility of a dispute that could lead to litigation. By preparing for the possibility of a dispute you could avoid legal fees that are the result of an ongoing dispute. Outlining a process for dispute resolution allows both parties to agree on a path to resolution prior to the licensing agreement being signed. Writing out how a disagreement will be resolved is crucial when two companies work together on an agreement.

Dealing with Contract Infringement

When dealing with the protection of intellectual property licensing agreements you want an attorney with an extensive background in IP rights, patent services, and licensing intellectual property. The intellectual property lawyers at The Stevens Law Firm have a passion for protecting innovative and groundbreaking ideas and working with companies to help protect their IP rights. We take intellectual property infringement very seriously and help to ensure that safeguards are put in place to help protect your company. Having a lawyer that has experience in both contract law as well as IP rights and infringement is imperative. Retaining an intellectual property lawyer is crucial when an intellectual property agreement is infringed upon.

When drafting a licensing agreement, we can put in place a contingency plan for scenarios where the contract is breached. Contact The Stevens Law Firm to speak with someone about drafting an intellectual property agreement.

Seek Legal Support for IP Agreements

Generally, no two contracts are ever the same and for good reasons. When creating a licensing agreement, its very important to tailor the contact to truly benefit all parties involved. During the negotiating part of the contact, you will likely reshape the agreement to ensure both parties agree with the terms. With The Stevens Law Firm, our intellectual property lawyers have worked on all sides of license agreements and have extensive backgrounds in the legal process in regards to intellectual property. We advise companies of all sizes on their intellectual property, their contracts, and ensure their agreement is executed to account for contingencies. Lawyers with The Stevens Law Firm have a passion for law and using their extensive knowledge to facilitate and support our clients through their legal endeavors. Utilizing an expert in intellectual property law helps to ensure that your license agreement includes critical componets to both protect and benefit your company.

latest thinking at stevens law firm

See All News >>